We here at The Motley Fool have been remiss in our duties to inform you, the individual investor, of the best strategies to win in the stock markets. Yes, we have featured gushing praise for the likes of Berkshire Hathaway's Warren Buffett, Fidelity's Peter Lynch, and others known well on Wall Street. But there is a man whose investing prowess is so singularly brilliant it surely eclipses them all, and we have written nary a word on him.
I speak here of the wondrous Sun of the 21st century, Kim Jong-Il. The many remarkable feats of the Dear Leader of the workers' paradise that is North Korea are legendary. After all, this is the man who writes operas, pilots jet fighters, and still routinely shoots rounds of golf in the low 50's. I only wish he were my father.
So what kind of investor is the Dear Leader? Exactly the kind you'd expect from somebody who hit 11 holes-in-one his first time out on the links. He bought Titanium Metals (NYSE:TIE) at $5.33 a share and sold at $47.62, a nearly 800% gain. He bought Myogen (NASDAQ:MYOG) at $5.21 and sold at $42.27, a 700% gain. Likewise with Capstone Turbine (NASDAQ:CPST), PW Eagle (NASDAQ:PWEI), and American Oriental Bioengineering (AMEX:AOB).
OK, so I made up the stuff about Kim Il-Jong investing in all those companies -- in order to illustrate a point. It's absolutely a farce to think that you can be a perfect investor. Despite this fact, some investors obsess with buying every stock at its low, selling every stock at its high, and regarding themselves as failures if they buy or sell a half-point too early.
There is also no such thing as an unemotional investor -- at least when it's your money that's at stake. Doubt, panic, fear, and greed all swim around in the ether between our ears. Is now a good time to buy Microsoft (NASDAQ:MSFT)? Should I wait a bit more on Intel (NASDAQ:INTC)? Can I afford to just sit back and let my Level 3 (NASDAQ:LVLT) ride?
Since we can't all buy at the lows and sell at the highs and since we can't just shut off our emotions, we need to figure out a way to work around all of this. We may not be able to earn Kim Jong-Il returns, but at least we'll be able to earn actual positive returns on our money.
Find a path
Ask yourself what kind of investor you are. Do you like to identify the next hot technology or product? Do you believe in making stock decisions based upon a firm grounding in what you see as the underlying value of the company? Do you like to mix and match a bit just to spice up a value-based approach or add a little solidity to a high-flying growth attack?
If there's any big lie on Wall Street, it's that there is One Right Method. Hogwash. Philip Durell has done well for investors in our Motley Fool Inside Value newsletter, and David Gardner's team at Motley Fool Rule Breakers has done even a little better over a similar timeframe. There are some differences in terms of stock-by-stock volatility and dividend income, of course, but both methods "work."
And they work, in part, because they know who and what they are. Being value-oriented like the Inside Value team means you're going to have to pass up some saucy growth ideas because the valuations just don't work. On the other hand, Rule Breakers' growth and new technology orientation means that they will occasionally pay too much and/or pick a technology or product that just doesn't live up to its initial promise.
Stay the course
Making a long-term commitment to investing is just as, and perhaps even more, important. The basic rule for being a successful investor is pretty much the same rule for being a successful species -- above all else, you have to stick it out and survive. Sabretooth cats and mastodons may have been nifty, but they're not here anymore. We are, so we "win."
If you pout when you lose, or run away in terror from tough markets, you'll forever be grasping at straws when it comes to making money in investing. After all, sometimes the stocks with the biggest three- or five-year pops also give you some white-knuckle moments in years one and two.
You also have to make a commitment to being a serious investor for the long haul. You have to be willing to devote time and attention to the markets. If you're a growth-oriented investor, you need to be up to speed on new game-changing technologies. If you're a more value-oriented investor, you need to spend just as much time on due diligence, perfecting your models and adjusting your forecasts and discount rates.
That's a pretty big time commitment, and it's not something that everyone's willing to undertake. If you're prepared to buckle down and keep doing your day-to-day homework even when the market is yakking all over your portfolio, you probably have what it takes. If, however, you only invest when the glossy magazines tell you it's safe, or when they're talking about the latest bull run in some sector, then I have different advice for you.
Go to Vegas. You'll lose the same amount of money, but you'll have more fun.
In conclusion...
Forget about being like Kim Jong-Il. Being the deluded despot of a backwards and impoverished nation stuck in an outmoded ideology is probably not nearly as much fun as it sounds. By the same token, forget about buying and selling every stock "just right." Buffett and Lynch can't do it, I can't do it, and you can't do it, either. In fact, holding out for the absolute "best" price is probably the surest way to make sure you never get it.
So instead of torturing yourself and calculating make-believe gains if you'd just held on "two more days," work on strategies with some long-term payoff. Figure out who and what you are in terms of investing, then make the commitment to being in the market for years at a time.
And while you're at it, take a look at Inside Value and Rule Breakers with a 30-day free trial. They may be polar opposites in terms of their apparent styles, but there's more here than meets the eye. Both have beaten the market, both have dedicated teams focused on their core philosophies, both have members standing by to answer questions and help out new investors, and both are available as free trials.
Unlike Kim Jong-Il's golf game and investing prowess, the success of these newsletters is real.
Microsoft and Intel are both Motley Fool Inside Value selections.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
